How, specifically, does the game engines friction work?
Friction belongs to the surface. When the object touches the surface the combined frictions result in a sliding force (both objects have materials).

Distance and Force belongs to force field. The force field is defined above the faces with that material. 'Above' means 


+Z (global) when Align to Normal is unset
+Z (local) when Align to Normal is set


I can't tell about the formulas, nor if friction belongs to force field too.